A ledger account is the basic unit in the accounting system.
Ledger accounts are set up for all the different types of transactions the entity uses in its business.
Transactions can be classified as assets, liabilities, owners equity, revenue or expenses. They are then coded by type and a ‘chart of accounts’ lists all the ledger accounts and account numbers.
A running balance is kept for each account because of the need to determine the financial position at any point in time. The financial reports then use those account balances.
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